The foreign exchange rate is a significant factor in specifying a country’s economic health. The exchange rate is the element that determines the value of a country’s currency. The rate is not stable, it always fluctuates. It changes regularly according to market conditions. Let’s start reviewing The lowest currencies.
There are some leading economic factors that impact foreign exchange rates that are explained below:
1. Interest Rates
This is one of the important factors that can affect the value of the currency and the exchange rate. Some economic variables like interest rates and currency exchange rates are closely connected. Exchange rates will be on the rise as the market attracts more capital.
2.Inflation Rates | The lowest currencies
Inflation rate is another significant factor that can affect currency exchange rates. If a country has a low inflation rate, its currency will have a higher value. Low inflation can also lead to a slow and steady increase in prices of the products and services. The increase in the inflation rate results in the depreciation of currency value.
3.Government Debt or Public Debt
Since government debt is a public liability, it is also known as public debt. If the government is indebted, it can lead to a reduction in the volume of money that is available. This situation can bring about inflation. When inflation is experiencing an increase, foreign investors do not take risks by investing in the currency. As a result, the value of currency lowers.
4.Political stability and the Right Financial Policy
The importance of political stability in economic affairs is undeniable. The foreign exchange rate will be under the influence of a country’s economic events. If the government suffers from instability, its economic performance will also suffer. The currency would not be profitable for investors. Foreign investors will trust a stable government. Not only will the investment improve foreign capital, but it will also increase the value of the internal currency. Foreign investors are more prone to count on a nation with a stable political system and the right financial policy.
Recession influences a country’s economic development. It is also applicable to the foreign exchange market. In the case of a recession, interest rates will fall. Foreign capital would diminish in value as a result of this. When interest rates are low and foreign capital is rare, the currency’s value starts to drop. As a result, the exchange rate would decrease.
The lowest currencies in the world
1. Iranian Rial
The lowest currency in the world is the Iranian Rial. In 1979 following the revolution, many great and reputable companies and businesses left Iran due to the uncertain situation. Afterward, some other political events such as the Iran-Iraq war, and the economic sanctions due to the country’s nuclear program intensified the situation. The Iranian government also imposed strict restrictions on access to foreign currency for their citizens, which resulted in a significant black market lift. All of this affected negatively economics and lowered the value of the currency approximately by 400%.
In 2015, following the government’s agreement to sign a nuclear deal with the U.S., France, the UK, China, Russia, and Germany for sanctions reduction, the situation was enhanced and domestic currency experienced stability. In 2018, following the heavy sanctions of the USA against Iran, this country could not export its petroleum which caused a huge deficit in the national budget, these sanctions along with galloping inflation decreased the value of the domestic currency by 600%. So the government decided to convert Rial to Toman.
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The second currency that has the lowest value in the world is the Vietnamese Dong. Vietnam is trying to shift from a centralized economy to a market one, so this country’s currency is suffering from devaluation. Still, economists believe that the Vietnamese government is on the right track and may soon succeed in reaching its closer Asian neighbors.
3.Lao or Laotian Kip
The Lao is one of the lowest currencies in the world which has not experienced any devaluation but was initially issued with a very low value. In addition, since its issue in 1952, the currency became stronger against the US Dollar and continues to increase its value.
4. Indonesian Rupiah of The lowest currencies
Indonesia is a developed country in Southeast Asia that boasts economic stability. Still, its money does not have a high exchange rate. The country’s administrative authorities are taking all steps to make the domestic currency stronger, but all their endeavors resulted only in unimportant changes.
5. Sierra Leonean Leone
Sierra Leone is an African country that struggles with poverty, which dealt with many serious tests that brought about the domestic currency depreciation. In August 2021 the Bank of Sierra Leone decided to change old banknotes and slash three zeroes from their face value. Sierra Leonean has one of the lowest currencies in the world.
6. Uzbek Sum
The beginning of an ambitious program of market-oriented amendments by the Uzbek government in 2017, which was unparalleled in the country’s modern history, caused the 2017 wave of devaluation.
7. Guinean Franc one of The lowest currencies
Devastating factors such as a high inflation rate, prevalent poverty, and growing gangsters decreased the value of the currency of Guinea, an African country that suffers from an inflated currency. Taking into account its natural resources such as gold, diamonds, and aluminum, this country should have one of the most valuable currencies in the world.
8. Paraguayan Guarani The lowest currencies
Paraguay is an impoverished country in South America. It experienced a catastrophic economic downturn, consisting of inflation, corruption, low education quality, a huge number of poor people, high unemployment, etc. Paraguay is one of the exporters of cotton and soybeans, but this is insufficient to meet its economic needs. Paraguay has one of the lowest currencies in the world.
The Colombian peso is known as the domestic currency of the Republic of Colombia. This currency was first put into circulation in 1810, with the beginning of the Colombian War of Independence from Spain, to take the place of the Spanish real that was in general use until then. Devaluation has increased drastically since 1980 when 1 USD equaled 50 COP. From the beginning up until now, the Colombian peso decreased in value about 3,000 times since its issue.
10. Cambodian Riel of The lowest currencies
Ranked tenth, Cambodian Riel is one of the lowest currencies in the world. The Cambodian Riel belongs to this Monarch State in Southeast Asia. This currency was introduced in 1995 to take the place of the Indochinese Piaster. Originally, the Riel had not a high exchange rate and was not popular among domestic people who had decided to utilize international currencies. Many Cambodians would rather make use of the US dollar for payments now, which brings about the national currency losing its value even more.